Russia faces toughest economic challenges in modern history – Medvedev

Russia has never faced so many challenges at once like now, including the crash of oil prices and severe Western economic sanctions. However, it adapted to a new economic reality and even managed to stabilize, Russian Prime Minister Dmitry Medvedev said.

“For the first time
in Russian history since the breakup of the USSR, we have come
under the influence of two external shocks immediately: the sharp
decline in oil prices and serious unjustified sanctions. Our
country has never run into such a collection of challenges at the
same time,” Medvedev said on Tuesday in an annual report to
the State Duma, the lower house of the Russian parliament.

The reality in 2014 appeared to become more complicated than the
worst expectations, according to the Prime Minister. He compared
the oil prices fall to $9 per barrel in 1998 to the present time,
“considering the dollar’s changing purchasing power and a
number of other economic factors and indicators”. The latest
sanctions are also the worst in the history of the country, he
said.

The losses the Russian economy has sustained from sanctions are
significant; according to the Prime Minister some experts have
put it at €25 billion. Negative trends in Russian economy will
continue throughout 2015, he added.

“In January-March the GDP dropped by 2 percent, the volume of
industrial production by 0.4 percent. The greatest decline felt
has been noted in investment activity,” Medvedev said.

If the external pressure increases and oil prices remain at
extremely low levels for a long time, we will have to develop in
a different economic reality, which will challenge our strength,
the Prime Minister said, adding that he was confident that Russia
could live even in such a reality.

‘Far from worst-case scenario’

However, the Russian PM says the current crisis is not the worst
possible, especially since the situation managed to stabilize.
“Everything that is happening is far from a worst-case
scenario and could be much worse and much more difficult,”
Medvedev said pointing to unemployment, the situation with
prices, the state of the banking system and the production
sector.

He claimed that last year the Russian government started to take
steps, given the past experience of the 2008 crisis. The foreign
exchange market calmed down and the economy is gradually adapting
to the floating exchange rate of the ruble.

"We still maintain a relatively low level of public debt. The
federal budget deficit, although slightly increased, according to
the results of this year will remain at an economically safe
level. Unemployment remains within reasonable parameters, it is
low against corresponding conditions in other countries,"
Medvedev said.